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Lowering the Cost of Doing Business Major reforms of the state’s workers’ compensation laws in 2003 have resulted in fewer claims filed by employees and better insurance rates for businesses By Christine Jordan Sexton Originally published in the June/July 2010 issue of 850 Magazine

Only a few short years ago, workers’ compensation rates were skyrocketing, and angry business owners stormed the state Capitol demanding relief.

After a sweeping round of reforms in 2003 that, among other things, significantly reduced attorneys’ fees and made it more difficult for injured workers to get permanent benefits, employers are back in the driver’s seat.

In fact, savvy companies most likely are eligible for dividends these days if they play their cards right, said Tom Stahl, executive director of the Florida United Business Association. FUBA sponsors a workers’ comp plan of its own, the Florida Citrus Business and Industries Fund.

The reason? Stahl said the workers’ compensation market is so competitive today and charges among the carriers are so similar that insurance companies and self-insurance funds have to compete for customers with creative dividend programs. Any company that is paying $10,000 in workers’ compensation premiums annually should be in a dividend plan, he added.

“In this environment today, you should be getting money back,” said Stahl, whose workers’ comp fund covers about 4,000 people across the state. He said the effectiveness of the reforms has caught even the carriers off guard. Accidents that once cost more than $300,000 before the 2003 reforms can now be settled for half that amount.

Independent insurance agent Maria Hendrickson agrees with Stahl.

“Take advantage of this while you can,” said Hendrickson, owner of the 10-person Tallahassee insurance firm that bears her name.

Hendrickson said she currently is able to help employers buy plans that are eligible for between 5-percent and 20-percent dividends after 18 months, depending on how long the company has been in business, its job safety record and the amount of its annual premium. She has been steering customers lately to Florida Citrus Business, which offers “seedling,” “tangerine,” “orange” and “grapefruit” plans. The larger the business, the longer its experience and the cleaner its work safety record, the larger the discount it can qualify for.

Safe workplaces, though, are the key to discounts on workers’ comp premiums for all employers, whether large or small.

Hendrickson refers some smaller companies that need workers’ comp coverage but don’t have a dedicated risk manager on staff — such as a small roofing company or tree removal business — to safety consultant Randy Marconnet.

The owner of A to Zero Consulting Inc. (atozerosafety.com) in Tallahassee, Marconnet offers businesses a variety of consulting services. These range from providing a tailor-made program designed to keep employees as safe as possible to surveying proposed work sites for construction firms to ascertain if there are any potential dangers.

Marconnet started his consulting firm in 2003 after the large construction company he worked for shut its doors. Some hire him proactively, before an accident — something Marconnet says is “an investment in keeping that good (claims) history.” Others hire him only after a workplace injury occurs.

Just how safe are Florida’s workplaces? The most recent information from the 2009 Workers’ Compensation Annual Report suggests that the number of “lost-time cases” statewide dipped by nearly 13,000 between 2007 and 2008. (A lost-time case is when an injured employee misses work and receives compensation for wages.) There were nearly 20,000 fewer claims in 2008 than 2006.

Data show that Leon, Escambia, Santa Rosa, Bay and Walton counties also had dips in the frequency of lost-time cases. But because the information is based on data reported by insurers, and claims can trickle into the state Division of Workers’ Compensation for years, the state considers any claims information after 2005 too soft to consider for purposes of trends.

The good news for a company that has a bad claim history, Marconnet said, is that it can work now toward reducing its rates. He pointed out that an approved safety program can earn an employer up to a 2-percent reduction on workers’ comp rates. Becoming certified as a drug-free workplace can earn them another 5-percent reduction. Those reductions are exclusive of the dividends that carriers are awarding. Combined, they can translate into real savings.

“I believe that with the state of the economy the way it is, insurance costs are big,” Marconnet said. “And if they don’t keep an eye on it, and make sure they have a good safety record, it can cost them even more.”

In addition to having a dedicated risk manager on staff or hiring an outside consultant, employers can also try to take advantage of programs sponsored by the state Division of Workers’ Compensation. The division is hosting a meeting on Aug. 10 in Pensacola where federal Office of Safety and Health Administration (OSHA) representatives will discuss workplace safety and workers’ compensation coverage obligations.

In addition, the University of South Florida administers an OSHA consultation program, a voluntary service to help make workplaces safer. None of the information shared by the employers becomes public. Employers can check out workplace safety studies at usfsafetyflorida.com.

Most Florida employers are required to carry workers’ compensation insurance coverage. The requirement applies to construction firms with one or more part- or full-time employees, as well as non-construction firms that have four or more part- or full-time employees. The Florida system is designed to be self-executing and no-fault, and to provide injured workers with their lost wages and the health care and rehabilitative services they need to get back on the job. In return for covering those costs, businesses are protected from the threat of civil suits.

In the past, workers’ compensation insurance was difficult to obtain because insurance carriers were leaving the market and, when coverage could be found, premiums were high. Employers often paid dearly, happy to find the coverage at any cost.

A 2003 rewrite of the law, which also changed the rules outlining when employees are considered permanently and totally disabled, directed the Office of Insurance Regulation to produce a yearly analysis of Florida’s workers’ compensation market.

The 2009 Workers’ Compensation Annual Report also noted that there were 246 insurance companies writing coverage in the state, along with a handful of self-insurance funds, which aren’t regulated under the laws covering commercial carriers.

While the sweeping 2003 reforms made workers’ comp more available and affordable, critics of the law say the lowered costs come at the expense of injured workers. State Insurance Consumer Advocate Sean Shaw recently met in Orlando with medical providers and employer/insurance carrier representatives to discuss the complaints he hears about the law.

Shaw didn’t pursue legislation in 2010, but the group he met with in Orlando will continue to meet over the summer, according to Office of Insurance Regulation senior analyst Johnny L. Moore.

While costs may have gone down, the expense of having the coverage always weighs heavy, said Vickie Goodman, the business administrator for heavy-construction firm Sandco Inc., which is one of Marconnet’s clients.

The Tallahassee construction company specializes in road construction. Before working with Marconnet, the firm paid roughly

26 percent higher premiums than other, similarly situated construction companies. After working with Marconnet over the past four years, Sandco now pays 15 percent less than the average construction firm.

Despite the 41-percent reduction in rates since 2006, workers’ comp coverage remains a serious burden for employers.

“It’s very expensive,” said Goodman, who noted that in the road construction business, the risks of injury are great. “It’s huge overhead.”